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Natural Gas back in the green as US Retail Sales save the day

  • Natural Gas prices are back in the green as US Retail Sales come in strong. 
  • The US Dollar trades stronger as well with US Retail Sales popping higher. 
  • US Natural Gas prices are back in the green.  

Natural Gas prices are back in the green as US Retail Sales numbers save the day. Not only were the numbers positive, they were a big beat on expectations and upward revisions of the previous month numbers. These numbers contradict what two US banks were mentioning during their earnings ahead of the US opening bell. 

Meanwhile, the US Dollar (USD) is back in the green after being in the red earlier. Reason as mentioned above, was the US bank earnings with the addtional warning that was issued on the US consumer. The number of defaulting loans and credit card delinquencies is rising, which could be the first signs of the US heading or being in a recession. 

Natural Gas is trading at $3.42 per MMBtu at the time of writing.  

Natural Gas news and market movers

  • European gas prices are dropping lower with traders on the lookout for Joe Biden’s visit to Israel on Wednesday in an effort to contain any further escalation in the region. The total price decline since last week for European Gas prices amounts to  40%. 
  • The surge in American gas prices could spur a switch to fuel oil instead. 
  • European Gas demand remains muted, with gas inventories filled up to 98%.
  • Data from Norwegian Gas company Gassco showed gas flow towards Northern Europe and the UK are at their normal average. 
  • The Suez Canal will raise transit fees by 5% to 15% for LNG and LPG carriers in the strait. 

Natural Gas Technical Analysis: Survive to die another day

Natural Gas tries to pare losses from Monday, though if the European Gas prices are any guidance, more pain is to come into the American Gas prices. Some upticks might be still granted due to the fragile equilibrium in the Middle East, though a firm uptrend does not seem to be at hand. With the expected mild temperatures ahead and European and American gas storages well-equipped to face the winter, rather look for the lower levels to come into play.

With the firm peak and breakthrough out of the trend channel, it will be crucial that the upper band of that same trend channel acts as support. There aren’t any significant resistance levels except for $3.65, the peak of January 17. From there, the high of 2023 near $4.3080 comes into play.

On the downside, the trend channel needs to act as support near $3.30. In case this level breaks down again, Natural Gas prices could sink to $.3.07, with that orange line identified from the double top around mid-August. Should the drop become a broader sell-off, prices could sink below $3 toward $2.85, near the 55-day Simple Moving Average.

XNG/USD (Daily Chart)

XNG/USD (Daily Chart)

Natural Gas FAQs

What fundamental factors drive the price of Natural Gas?

Supply and demand dynamics are a key factor influencing Natural Gas prices, and are themselves influenced by global economic growth, industrial activity, population growth, production levels, and inventories. The weather impacts Natural Gas prices because more Gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources impacts prices as consumers may switch to cheaper sources. Geopolitical events are factors as exemplified by the war in Ukraine. Government policies relating to extraction, transportation, and environmental issues also impact prices.

What are the main macroeconomic releases that impact on Natural Gas Prices?

The main economic release influencing Natural Gas prices is the weekly inventory bulletin from the Energy Information Administration (EIA), a US government agency that produces US gas market data. The EIA Gas bulletin usually comes out on Thursday at 14:30 GMT, a day after the EIA publishes its weekly Oil bulletin. Economic data from large consumers of Natural Gas can impact supply and demand, the largest of which include China, Germany and Japan. Natural Gas is primarily priced and traded in US Dollars, thus economic releases impacting the US Dollar are also factors.

How does the US Dollar influence Natural Gas prices?

The US Dollar is the world’s reserve currency and most commodities, including Natural Gas are priced and traded on international markets in US Dollars. As such, the value of the US Dollar is a factor in the price of Natural Gas, because if the Dollar strengthens it means less Dollars are required to buy the same volume of Gas (the price falls), and vice versa if USD strengthens.

Author

Filip Lagaart

Filip Lagaart is a former sales/trader with over 15 years of financial markets expertise under its belt.

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